Civil service head says Public Service Commission will take up Schembri case

An alleged breach of ethics by the OPM's director of internal audit Rita Schembri is being investigated by the Auditor General, and not a disciplinary board set up by the Public Service Commission.

The head of the civil service - principal permanent secretary Godwin Grima - says that he has already presided over the IAIB, the board that supervises the Internal Audit and Investigations Department that Schembri is head of.

Having recommended that any investigation now goes to the constitutionally-appointed Auditor General, Grima said Schembri's case will not be investigated by a disciplinary board set up by the Public Service Commission - as yet.

"Whatever instrument is used, the PSC's involvement is anyway mandatory at the conclusion of the process," Grima told MaltaToday about what at first glance looks like an unorthodox approach at investigating the ethics' breach.

Inquiries by the Auditor General generally produce recommendations to government ministries on improving public service: a procedure that often skirts proper disciplinary or judicial proceedings on breaches and irregularities.

The Public Service Commission's disciplinary boards have investigated numerous violations of the estacode by civil servants who carried out undeclared private work, often leading to direct sanctions.

As her direct superior, Grima says the allegations against Schembri have been now considered by a board - the Internal Audit and Investigations Board. "Seeing that I already chaired the Board, which is set up to supervise the Internal Audit and Investigations Department, I felt I should use the IAIB in the circumstances. Whatever instrument is used, the Public Service Commission's involvement is anyway mandatory at the conclusion of the process."

Permanent secretary Rita Schembri, the director of the IAID - a sensitive unit that has carried out investigations on EU funds misappropriations, controversial tuna ranching quotas, and also collaborated in the OLAF investigation into former European Commissioner John Dalli - is believed to have carried out undeclared private consultancy services from her government office, in breach of the estacode's code of ethics.

Email correspondence and a whistleblower's account shows she was part of a team set up by the Far East Entertainment gaming company, to purchase a 60% stake in the Casinò di Venezia.

Although Grima's IAIB have recommended that it be the Auditor General to investigate the matter, it was Schembri herself who later wrote to the Auditor supplying what appear to be 'terms of reference' to scrutinise her office's work and the allegations about her.

Indeed, the wide terms of reference go beyond the immediate concerns of an ethics breach - Schembri has asked Auditor General Anthony C. Mifsud to carry out a scrutiny of all IAID audits, as well as:

• Allegations by former EU commissioner John Dalli of her personal participation in the OLAF investigation concerning a bribery allegation (Schembri heads the OLAF liaising unit, Afcos, which is part of the IAID);
• Allegations made by whistleblower Philip Rizzo who was part of the casino bid and met Schembri in her Valletta office;
• Any conflict of interest from her non-executive directorship in private investment firm Brait, and her chairmanship of the Farmers' Wine Cooperative;
• If any of her court litigation in personal civil cases impinged on her work at the IAID.

When asked why Schembri was seemingly taking the 'initiative' to tell Mifsud what his investigation should focus upon, Grima's reply did not answer why it was not him to supply the terms of reference

"the IAIB's recommendation to refer the case to the Auditor General is well documented. The Permanent Secretary also decided to communicate with the Auditor General."

 - But can the person under scrutiny, in this case Ms Schembri, supply what appear to be terms of reference for the Auditor General to investigate? - MaltaToday asked.

"Since I was not involved in the drawing up of Ms Schembri's letter to the Auditor General, I regret I cannot comment on [these] questions," Grima said.

Grima was equally unresponsive when asked why had Schembri asked the Auditor General to investigate matters that went beyond her ethics breach, such as her role in the John Dalli investigation, or her directorship in Brait, a private investment firm for which approval had been given by Grima back in April 2012.

On this point, Grima has confirmed that while Schembri did ask for approval to take up the post of non-executive director with the South African, Luxembourg-base investment firm, Schembri never discussed her services for FEE plc with him.

So why had Grima decided to repeal his approval for Schembri's Brait directorship?

"As Ms Schembri's direct superior, just as I felt that her request in April 2012 to sit as a 'non-executive' director of a foreign company was to be facilitated, likewise I felt that in the current circumstances, I should suspend the permit... she cannot, henceforth, participate in Brait SE activity."

Whistleblower reacts

Philip Rizzo, a disability rights' campaigner and auditor who was for some time involved in the FEE plc's bid for the casino, has stood by his decision to blow the whistle on Schembri.

"I remain prepared to be questioned under oath, formally and hopefully in public, rather than behind closed Auditor General doors," Rizzo said, saying the decision to allow the Auditor General to investigate Schembri would allow the hearing to be carried behind closed doors.

"As in a previous case in 1994 with a conflict of interest that Ing. Emanuel Farrugia had on the San Raffaele hospital tender, I will perform my civic duty despite the unwelcome public attention to myself and discomfort to my already-challenged family."

Rizzo said the "[FEE plc chairman] Colin Perkins described her in a letter to the IAIB as a person of absolute probity. Does not such a statement firstly beg that such letter be published, that Mr Perkins's  own uprightness be investigated, and finally that he should be asked to give evidence in public, not behind closed Auditor General doors, and confronted with myself under oath?"

Rizzo also told MaltaToday that Schembri was not acting as a "mere assessor" of his role during the meeting they held at the IAID in 16 March 2012 - as claimed in The Times.

"I will conclusively prove this to be a fabrication as part of her defence. Ms Schembri should be asked whether her also having requested Dr John Refalo to attend her IAID offices, weeks after myself, to discuss Casinò di Venezia affairs, was not in a role of consultancy to Perkins's FEE."

According to the Times, Schembri's meeting with Rizzo was not related to the FEE casino bid, but to a review she was conducting of government financial grants to NGOs, amongst Inspire foundation, on whose board Rizzo sits.

"Our first meeting was scheduled for the 27 February... the IAID 'audit' of Inspire only took place on 18 April 2012. When I met with Schembri in March I was wholly unaware of the existence of the IAID and thought Schembri was a public accountant in private practice.

BACKGROUNDER - Rita Schembri

Rita Schembri, the director-general of the IAID, is a member of the supervisory committee of OLAF, the EU's anti-fraud unit.

Former Commissioner John Dalli called into question her double role: she headed the anti-fraud coordinating unit that liaised with OLAF during its investigation of him, when she was also member of the committee that would later supervise OLAF's work. She has since withdrawn from this part of her job to avoid any conflict of interest.

Schembri's role in the John Dalli investigation attracted criticism from people who questioned her own ethics: like whistleblower Philip Rizzo, who revealed she was carrying out consultancy on a multi-million bid for a casino stake, even meeting him inside her IAID office.

It turns out her services for FEE plc are not declared to the head of civil service - a breach of the estacode's code of ethics.

Coincidentally, a pending civil case she has with people who sub-let a restaurant that she herself was renting - currently being heard in court - brought to light a previous litigation which showed she had breached the lease agreement and defrauded the owner.

The owner, Joe Borg, decided to report Schembri to OLAF if she did not pay her sub-lessees monies she ostensibly owed them. His email 'threat' to Schembri was reported to the police, and he was arraigned in court instantly and released from jail on bail five days later.